Ald. Beale drops objection to new Chicago Costco

• Reprints

Updated: August 4, 2011 4:20PM

An influential alderman on Tuesday lifted the brick he had placed on construction of Chicago’s second Costco warehouse after fleshing out a two-year-old land swap that will deprive the city of $1 million in annual rental income.

Last week, Ald. Anthony Beale (9th), chairman of the City Council’s Transportation Committee, held up a street closing needed to pave the way for the new Costco at 14th and Ashland.

Beale was determined to protest a two-year-old land swap with the Illinois Medical District that spared a Little League field at Polk and Leavitt.

The land the city gave away is now targeted for Chicago’s second Costco at 14th and Ashland. That means the Illinois Medical District—and not the city—will benefit from the 20-year Costco lease.

Beale’s decision to hold up the street closing last Friday triggered frenzied, behind-the-scenes negotiations to salvage the deal, made possible by a lucrative property tax break that will save Costco $1 million over a 12-year period.

The Far South Side aldermen was reminded that the Illinois Medical District lost valuable land in the 2009 swap that it intended to lease to pay off bonds used to bankroll capital projects. And Beale was told that revenue from the Costco lease would help retire roughly one-third of the district’s outstanding debt.

“They’ve informed me that their money is not profit, because they’re a not-for-profit organization. Their money is rolled back over into bond debt they incur over time. That was not articulated Friday like it should have been,” Beale said.

With that explanation—and assurances that the Costco project will create 600 construction jobs, 250 full-and part-time jobs and $27 million in sales tax revenue for the city over a 12-year-period—Beale reversed himself.

The Transportation Committee approved the street closing, but not before the chairman noted the double-standard between Costco and WalMart.

“Other retailers were asked to have a community benefits agreement as well as project labor agreements. In this case, we have none,” Beale said.

Beale also seized the opportunity to encourage Costco to “look to the south” for future development.

“There’s a lot of food deserts that still need to be addressed and a lot of retail issues that need to be addressed,” Beale said.

Costco’s attorney David Reifman hedged when asked whether the warehousing giant was “looking on the South Side of Chicago” to build any stores.

“Costco is always looking at locations that…have a larger demographic area than other general merchandising retailers. It does fewer stores,” Reifman said.

“Each store is given time to mature. Then we look and see how the demographic shifts…[But] yes, Costco is looking in the future towards other locations as it moves further south.”

Last summer, the City Council approved a second WalMart—in Beale’s Far South Side Pullman Park community—paving the way for a $1 billion WalMart expansion that could change the face of retailing in Chicago.

It happened after WalMart and organized labor cut an unprecedented deal that calls for the world’s largest retailer to pay its starting Chicago employees at least $8.75-an-hour—50 cents above Illinois’ Minimum wage.

Mayor-elect Rahm Emanuel has said he intends to press retailing giants to build stores in impoverished inner-city neighborhoods where fresh fruits and vegetables are not readily available.